Event-study volatility and bootstrapping: an international study

Naceur Essaddam and Ayman Mnasri

Applied Economics Letters, 2015, vol. 22, issue 3, 209-213

Abstract: This paper examines the impact of terrorism on volatility of stock returns over 17 market indices between 1994 and 2005. Using a volatility event study approach methodology, we find that terrorism has a significant impact on the stock market volatility. We also propose a new semi-parametric bootstrap technique which consists in re-sampling the rescaled residuals obtained from the estimations of GARCH equations before the event and using a moving block approach where the residuals are chosen in a chronologically consecutive manner each time we generate a bootstrap sample. This technique provides a better way to perform inference that is more reliable on finite samples than inference based on conventional asymptotic theory.

Date: 2015
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DOI: 10.1080/13504851.2014.934423

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